Qualcomm 2002 Annual Report Download - page 49

PAGE 47
QUALCOMM 2002 ANNUAL REPORT
Wireless’ business. As a result, we recorded $162 million and $18 million in other-
than-temporary losses on marketable securities for the notes and stock, respectively,
during fiscal 2002. We also recorded $59 million in losses related to changes in the
fair values of Leap Wireless derivative investments for fiscal 2002. The remaining
recorded values of Leap Wireless investments totaled $1 million at September 30,
2002. Under the terms of our senior secured credit facility with Leap Wireless, we are
committed to fund up to $125 million in connection with Leap Wireless’ bid for PCS
spectrum licenses in the FCC’s Auction No. 35, however it appears unlikely that Leap
Wireless will be able to use this credit facility. See “Notes to Consolidated Financial
Statements, Note 11 — Commitments and Contingencies.”
INQUAM LTD
In October 2000, we agreed to invest $200 million in the convertible preferred shares
of Inquam Limited (Inquam). Inquam was formed to acquire, own, develop and manage
wireless communications systems, either directly or indirectly, with the primary intent of
deploying CDMA-based technology. At September 30, 2002, our investment in Inquam
was $114 million, net of equity in losses, and $27 million of the equity funding commit-
ment was outstanding. Inquam’s management expects to meet certain operational
milestones necessary for expansion of Inquam’s CDMA operations during 2003. In
addition, Inquam’s management expects to raise additional funds over the next
12 months required for Inquam to realize the full value of its current operations.
Remaining funding commitments from us and another investor are expected to be
exhausted by March 2003. Total additional funding required by Inquam for calendar 2003
is estimated to be between $175 million and $195 million. If new investors cannot be
found or should existing investors decide not to provide additional funding, or if
Inquam does not promptly meet certain operational milestones necessary for expan-
sion, Inquam’s growth potential and the value of our investment in Inquam may be
negatively affected.
FISCAL 2002 COMPARED TO FISCAL 2001
Total revenues for fiscal 2002 were $3,040 million, compared to $2,680 million for
fiscal 2001. Revenues from Samsung, Kyocera, and LG Electronics, customers of both
QCT and QTL, comprised an aggregate of 15%, 14% and 11% of total consolidated rev-
enues, respectively, in fiscal 2002. In fiscal 2001, revenues from Samsung, Kyocera,
and LG Electronics, comprised an aggregate of 14%, 12% and 10% of total consolidated
revenues, respectively. The percentages for Kyocera included 3% and 4% in fiscal 2002
and 2001, respectively, related to services provided to Kyocera by employees from our
terrestrial-based CDMA wireless consumer phone business which was sold to
Kyocera in February 2000.
Revenues from sales of equipment and services for fiscal 2002 were $2,204 million,
compared to $1,908 million for fiscal 2001. Revenues from sales of equipment and
services for fiscal 2002 included $125 million related to the consolidation of Vésper
Holding effective in November 2001 and $8 million related to the Globalstar business.
Revenues from sales of equipment and services for fiscal 2001 included $54 million
related to Globalstar. Excluding Vésper Holding and Globalstar, revenues from sales
of equipment and services increased by $217 million. Revenues from sales of equipment
and services increased $218 million in our integrated circuits business, primarily due to
an increase in unit shipments of MSM integrated circuits, and the effect of the change
in product mix toward the higher end devices utilizing our 3G CDMA2000 1X integrated
circuits products. Software development services revenues related to the QChat
licensing agreement increased $34 million.
Revenues from licensing and royalty fees for fiscal 2002 were $836 million, com-
pared to $772 million for fiscal 2001. QTL segment revenues from royalties paid by
third parties increased $64 million.
Cost of equipment and services revenues for fiscal 2002 was $1,137 million, com-
pared to $1,035 million for fiscal 2001. Cost of revenues for fiscal 2002 included $183
million related to the consolidation of Vésper Holding and $11 million related to our
on-going obligation to Globalstar. Cost of revenues for fiscal 2001 included $129 million
related to Globalstar. Excluding Vésper Holding and Globalstar, cost of revenues as a
percentage of revenues was 32% for fiscal 2002, compared to 35% for fiscal 2001. The
margin improvement in fiscal 2002 was primarily due to the change in product mix
toward the higher end devices utilizing our CDMA2000 1X integrated circuits products
and the increase in revenues from royalties in the QTL segment. Cost of revenues as
a percentage of revenues may fluctuate in future quarters depending on the mix of
products sold and services provided, royalties and license fees earned, competitive
pricing, new product introduction costs and other factors.
For fiscal 2002, research and development expenses were $452 million or 15% of
revenues, compared to $415 million or 15% of revenues for fiscal 2001. The dollar
increase in research and development expenses was primarily due to $41 million in
increased integrated circuit product initiatives to support high-speed wireless
Internet access and multimode, multi-band, multi-network products including
cdmaOne, CDMA2000 1X/1xEV-DO, GSM/GPRS, WCDMA and position location tech-
nologies and $14 million in increased QWBS research and development initiatives,
partially offset by a $29 million reduction of development efforts related to the
Globalstar business.
For fiscal 2002, selling, general and administrative expenses were $509 million or
17% of revenues, compared to $367 million or 14% of revenues for fiscal 2001. Selling,
general and administrative expenses for fiscal 2002 included $107 million related to
the consolidation of Vésper Holding. Excluding Vésper Holding, selling, general and
administrative expenses comprised 14% of revenues. The dollar increase was primarily
due to a $33 million increase in marketing and support efforts related to products and
services of our QIS division, including the BREW product, $23 million associated with
the expansion of our integrated circuit customer base and international business